CW 1259: Cap Rates, RV Ratios & Bubble Detection

Jason Hartman finishes his conversation with investment counselor Doug about real estate and PE ratios. The two discuss the importance of analyzing RV ratios in markets to discover whether a bubble is forming (or might already be formed) but also the dangers of relying strictly on those RV ratios.

Key Takeaways:

[2:38] How to think about Cap Rates

[5:55] Commercial property doesn’t have enough risk premium right now

[9:34] Real estate has a lot of embedded risk protection a lot of people don’t realize

[15:16] The thing that is going to drive the next housing downturn will be when we see rising mortgage rates

[17:40] The 1% RV is for a turnkey rehab. New construction isn’t getting 1% right now

[21:16] When your RV hits .5 you’re looking at a bubble